MSE News: Budget 2015: ISAs to become fully flexible with withdrawals allowed

david78

No mention of these flexibilities in the budget. But allowance is going up next year, and there is a new Lifetime ISA (LISA?) for people under 40.

xylophone

Coventry will facilitate flexible ISA.

http://www.coventrybuildingsociety.co.uk/savings-accounts/personal-savings-allowance-and-flexible-isas.aspx

Plus

Spoke to a sales advisor from Virgin Money the other day, apparently their Easy Access Cash ISAs (1.11%) will be eligible for flexibility, but other ISAs won't.

There might be some cunning tricks that can be done with a provider who offers multiple ISAs - eg hold your money in a Virgin Defined Access ISA (1.41%, three withdrawals per year, no flexibility), and transfer money you want to withdraw into their Easy Access ISA before withdrawing it. You might be able to do quick same-provider transfers. Then repay into the Easy Access before the end of the year.

Plus

Shedman wrote: »

Anybody know if it is better to transfer out to a new flexible ISA provider before the end of this tax year (in which case I need to get my skates on) or will it not matter if transferred across in new tax year.

I can't think of a reason of why you would want to transfer before this year is out - but one reason to wait is that we'll see what deals everyone are offering.

I'm not sure if you can repay old money into the same ISA and then transfer it elsewhere before the year end - anyone know if this is possible? If not, you'd have to keep money in your 'withdrawal' ISA until the end of the year, so you might want to pick someone who has a stable rate, not a super-bonus-issue-437 account where the rate might go to 0.0000001% in the middle of the year.

gwapenut

Nationwide have clarified their interpretation which is that you can only replace withdrawn funds in the ISA to which you are currently subscribing.

So, if I transferred an ISA to NW on 7 April, and subscribed to a Saffron Regular Saver on 10 April, then they say that I could not withdraw from the NW ISA and then replace the funds, because I would be actively subscribed to the Saffron ISA.

It's not clear to me whether this is a conservative (and potentially too-strict) interpretation, or if it is the spirit of the new rules. It wasn't clear to me from masonic's excerpt either.

If true, then it doesn't rule out maximising interest in current accounts - but would rule out maximising interest in a parallel regular saver ISA for the new tax year.

gwapenut

^
but the coventry seem to contradict this with their final example:
Inactive' ISAs can become flexible
Under HMRC rules, an ISA will become 'inactive' at the end of the tax year if you haven't paid in any of your annual ISA allowance during that tax year. If the ISA becomes flexible, you can still take money out if your previous years' ISA savings, and pay back in up to your flexible ISA allowance.
If you'd like to use your inactive Coventry ISA for your current year's ISA allowance (and the account's terms allow it), we'll need to re-register it for you. Call us on 0800 121 8899 to find out what's possible, and to re-register if applicable.

masonic

gwapenut wrote: »

Nationwide have clarified their interpretation which is that you can only replace withdrawn funds in the ISA to which you are currently subscribing.

So, if I transferred an ISA to NW on 7 April, and subscribed to a Saffron Regular Saver on 10 April, then they say that I could not withdraw from the NW ISA and then replace the funds, because I would be actively subscribed to the Saffron ISA.

It's not clear to me whether this is a conservative (and potentially too-strict) interpretation, or if it is the spirit of the new rules. It wasn't clear to me from masonic's excerpt either.

If true, then it doesn't rule out maximising interest in current accounts - but would rule out maximising interest in a parallel regular saver ISA for the new tax year.

In my view, Nationwide's interpretation is incorrect and seems to be founded on the misunderstanding that money removed and replaced would constitute a subscription. This is clarified in one of the later clauses from the draft ISA Guidance Notes I previously quoted:

6.82 Replacement subscriptions do not count as subscriptions for the purpose of determining whether the investor has subscribed to more than one ISA of the same type, or whether there has been a ‘gap year’ in relation to a continuous ISA application.

Nationwide's position is probably a commercially driven choice on their part.

Shedman

This note issued by BBA per the link on URL below seems to be pretty clear on what is and isn't going to be allowed - along with a number of examples which lead me to agree with Masonic's view.

https://www.bba.org.uk/customers/personal-banking/savings-and-investments/industry-leaflet-on-flexible-isas/

gwapenut

masonic wrote: »

In my view, Nationwide's interpretation is incorrect and seems to be founded on the misunderstanding that money removed and replaced would constitute a subscription. This is clarified in one of the later clauses from the draft ISA Guidance Notes I previously quoted:


Nationwide's position is probably a commercially driven choice on their part.

I think they are wrong to say that an old ISA cannot have its withdrawals replaced, though to pick you up on one point - I think technically they may be right that replacing the funds would be termed a subscription.

https://www.gov.uk/government/publications/individual-savings-accounts-increasing-flexibility-for-savers/individual-savings-accounts-increasing-flexibility-for-savers

"In certain circumstances where a saver makes a payment that does not count towards the ISA subscription limit, it will also be possible for them to subscribe to more than one cash and one stocks and shares ISA in a year."

masonic

gwapenut wrote: »

I think they are wrong to say that an old ISA cannot have its withdrawals replaced, though to pick you up on one point - I think technically they may be right that replacing the funds would be termed a subscription.

https://www.gov.uk/government/publications/individual-savings-accounts-increasing-flexibility-for-savers/individual-savings-accounts-increasing-flexibility-for-savers

"In certain circumstances where a saver makes a payment that does not count towards the ISA subscription limit, it will also be possible for them to subscribe to more than one cash and one stocks and shares ISA in a year."

For the avoidance of doubt, I'm using the meanings described by HMRC in the document I previously linked, which clearly distinguishes between the term "replacement subscription" and "subscription". This may seem like splitting hairs, but HMRC uses the term "subscription" over 250 times in the existing document to mean the addition of new money to an ISA that counts against the annual subscription limit and must be reported to them.

The statement from the October 2015 policy paper that "it will also be possible for them to subscribe to more than one cash and one stocks and shares ISA in a year" cannot be true if "replacement subscriptions do not count as subscriptions for the purpose of determining whether the investor has subscribed to more than one ISA of the same type" as stated in the more recent document. So, it seems the definitions have been tidied up in the intervening period (probably shortly after HMRC realised it was going to have to add a multitude of qualifying statements in the existing document to exclude replacement subscriptions from each reference to subscriptions).